Uncle Sam may be due his cut every year by April 15, but don’t make his slice of your financial pie any bigger than it needs to be. There are more than 350 tax deductions available each year, and you’re likely missing out on one or more of these “secret” tax deductions.
1. Educational Expenses – Not just limited to tuition (though that counts, too), textbooks count as do supplies and lab fees. Save your receipts, since you’ll need them if you’re ever, gulp, audited.
2. Childcare – The daycare services your gym provides counts, as does the babysitter you pay to watch your kids once a month on “date night.” If you’re paying someone to take care of your kid or kids, then you can deduct the amount you pay. Some places, like gym day cares, will have a Tax Identification Number that you’ll need for your taxes. As for that babysitter, pay her enough and you may want to get her Social Security Number, since it’ll work as a means of identifying her. You just may want to warn her that you’ll be reporting the cost, which means she should report it as income. However, that’s another conversation.
3. Uniforms and Other Business Expenses – The cost of a uniform you are required to wear to work counts as a business-related expense. Let’s talk home businesses. Even if operating at a loss, some of the costs you incur operating a home business can be written off including portions of rent and mortgage payments, utility bills and office supplies.
4. Health Care Expenses – Some medical expenses can be written off, so keep those receipts, even for things like over-the-counter allergy medications and herbal flu remedies. If you paid medical expenses for a parent or child, there are deduction possibilities here, too.
5. Student Loan Interest – Up to $2,500 can be deducted.
6. State Sales Tax – You get to deduct either state and local income taxes OR state and local sales taxes, so if you live in a state without an income tax, deducting your state sales tax could lead to a large benefit, especially if during the tax year your purchases included something large, like a vehicle or boat. However, the deduction isn’t limited to huge purchases. All sales tax is eligible. Though a difficult deduction to prove, keep as many receipts as possible during the tax year. If audited, your ability to show your attempts to prove every deduction will go a long way.
7. Refinancing Points – If you refinanced your home during the tax year, any points you’re paying to refinance can be deducted on a monthly basis over the life of the loan. Think about that each month when you’re writing that large check for your home.
8. Deductions Related to Casualties – This hasn’t been the best year when it comes to earthquakes, fires and hurricanes, especially for those of us living on the east coast. You may be due a credit on your losses as long as the area where you live has been declared a disaster area.
9. Home Energy Efficiency Improvements – Install doors, windows, water heaters, furnaces or air conditioners that help make your home more energy efficient and you may be due a deduction.
10. Continuing Education – Itemize your deductions and don’t miss out on this potentially hefty deduction since professional publication subscriptions, professional dues, investment advisory fees and even what you pay someone to prepare your return counts.
11. Charity Begins at Home – Monies donated to a charity can be fully deductible up to 50 percent of your adjusted gross income, as can any costs incurred while volunteering for a charity. Drove your car to get there? Deduct your mileage.
12. Finally, a Perk to Being Unemployed – Expenses incurred while looking for a job, including resume services and job counseling services, can be deducted. This doesn’t work if you’re looking for your first job.
Take the pain out of tax preparation by keeping good records, filing receipts and reading about deductions new for the 2012 tax year. Cheating doesn’t pay, but knowing what you’re owed can and will. Upwards of $1.75 trillion dollars in deductions are claimed yearly. Give Sam his and keep yours yours.